Search and menus

Search

Topics menu

You are here:

ARCHIVED - Transcript, Hearing 28 October 2010

This page has been archived on the Web

Information identified as archived is provided for reference, research or recordkeeping purposes. It is not subject to the Government of Canada Web Standards and has not been altered or updated since it was archived. Please contact us to request a format other than those available.

Archived

Providing Content in Canada's Official Languages

Please note that the Official Languages Act requires that government publications be available in both official languages.

In order to meet some of the requirements under this Act, the Commission's transcripts will therefore be bilingual as to their covers, the listing of CRTC members and staff attending the hearings, and the table of contents.

However, the aforementioned publication is the recorded verbatim transcript and, as such, is transcribed in either of the official languages, depending on the language spoken by the participant at the hearing.

Volume 3, 28 October 2010

TRANSCRIPT OF PROCEEDINGS BEFORE

THE CANADIAN RADIO-TELEVISION AND

TELECOMMUNICATIONS COMMISSION

SUBJECT:

Obligation to serve and other matters (Formerly Proceeding to review access to basic telecommunication services and other matters)

HELD AT:

Ballroom A-B

Days Inn and Conference Centre

14 Mountjoy Street South

Timmins, Ontario

Transcripts

In order to meet the requirements of the Official Languages

Act, transcripts of proceedings before the Commission will be

bilingual as to their covers, the listing of the CRTC members

and staff attending the public hearings, and the Table of

Contents.

However, the aforementioned publication is the recorded

verbatim transcript and, as such, is taped and transcribed in

either of the official languages, depending on the language

spoken by the participant at the public hearing.

Canadian Radio-television and

Telecommunications Commission

Transcript

Obligation to serve and other matters (Formerly Proceeding to review access to basic telecommunication services and other matters)

BEFORE:

Konrad von Finckenstein Chairperson

Len Katz Commissioner

Rita Cugini Commissioner

Timothy Denton Commissioner

Suzanne Lamarre Commissioner

Peter Menzies Commissioner

Candice Molnar Commissioner

Marc Patrone Commissioner

ALSO PRESENT:

Lynda Roy Secretary

Alastair Stewart Legal Counsel

John Macri Hearing Manager

HELD AT:

Ballroom A-B

Days Inn and Conference Centre

14 Mountjoy Street South

Timmins, Ontario

October 28, 2010

- iv -

TABLE OF CONTENTS

PAGE / PARA

PRESENTATION BY:

Ontario Telecommunications Association (OTA) and TBayTel 490 / 2902

MRC Papineau 577 / 3403

- v -

UNDERTAKINGS

Undertakings can be found at the following paragraphs:

3237, 3251, 3265 and 3345

Timmins, Ontario

--- Upon resuming on Thursday, October 28, 2010 at 0900

2895 LA SECRÉTAIRE: À l'ordre, s'il vous plaît. Order, please.

2896 THE CHAIRPERSON: Good morning. Bonjour.

2897 Madame la Secrétaire, commençons.

2898 THE SECRETARY: Good morning and bonjour à tous.

2899 We will begin today with the presentations of Ontario Telecommunications Association, OTA, and TBayTel who are appearing as a panel.

2900 Appearing for OTA and TBayTel is Mr. Jonathan Holmes.

2901 Please introduce your colleagues, after which you will have 50 minutes to make your presentation.

PRESENTATION

2902 MR. HOLMES: Thank you very much.

2903 Good morning, Mr. Chairman and good morning to the other Members of the Commission panel. We are very pleased to have this opportunity to present our views to the Commission on the issues that are central to this important proceeding.

2904 First of all, we would like to introduce ourselves to you.

2905 My name is Jonathan Holmes, I am the Executive Director of the Ontario Telecommunications Association.

2906 To my far right is Ms Angela Schneider. Angela is the General Manager of Hay Communications Co-operative which is headquartered in Zurich, Ontario, just south of Bayfield and straight west of Stratford. Hay's operating territory borders the beautiful shores of Lake Huron and heads inland from there. Hay Communications has just over 5,600 NAS.

2907 To Angela's left and my right is Mr. Keith Stevens. Keith is no stranger to you and is Chairman of Execulink Telecom which is headquartered in Burgessville, Ontario, just south of Woodstock. Execulink serves two non-contiguous areas; the area immediately around Burgessville and the area around Thedford which is northwest of London. Execulink has 5,300 NAS.

2908 On my opposite side, to my far left, is Mr. Tracy Cant, Director of Finance and Regulatory Affairs at Ontera, which is headquartered in North Bay, Ontario on the shores of Lake Nipising. Ontera serves a number of exchanges on the rugged Canadian Shield and has just over 4,200 NAS.

2909 Next to Tracy is Mr. Paul Downs who is President of Nexicom Telephones Inc. headquartered in Millbrook Ontario, southwest of Peterborough. Nexicom Telephones has just over 1,800 NAS.

2910 Seated to Paul's right and my left is Mr. Robert Olenick, who is a Regulatory Analyst at TBayTel, which is headquartered in Thunder Bay, Ontario. TBayTel serves the city of Thunder Bay as well as outlying areas. TBayTel has about 71,000 NAS.

2911 In this proceeding the OTA is representing 19 SILECs operating throughout rural Ontario which together serve approximately 75,000 NAS. The serving territories of these companies range from a single exchange to six exchanges, none of which encompass a major population centre and all of which are designated high-cost by the Commission.

2912 TBayTel's operating territory is a single exchange consisting of 12 wire centres, eight of which are high-cost.

2913 The OTA and TBayTel have filed common evidence and interrogatory responses on the issues of the obligation to serve, which we will refer to as "the obligation"; the basic service objective, which we will refer to as "the objective"; and the local subsidy. However, the OTA and TBayTel have made separate submissions on the issue of local competition in the territories of the SILECs.

2914 We will continue on with that approach in our presentation to you today. We will begin with our joint presentation on our common issues, the OTA will then present its position on local competition followed by Mr. Olenick who will present TBayTel's position on local competition.

2915 Before we discuss the four main topics of this proceeding, we would like to take a few minutes to paint for the Commissioners a picture of the SILECs' environment, operations and the services we provide to our customers. To do that, I will turn the microphone over to Paul Downs of Nexicom Telephones.

2916 MR. DOWNS: Thank you, Jonathan.

2917 Mr. Chairman and Commissioners, if you examined the 20 SILECs that our panel represents today at this hearing, including TBayTel, you would find that the average number of exchanges served is three. These SILECs serve rural and northern areas of the province where population densities are very low. In fact, 85 percent of Ontarians live in urban areas. When you consider the location of SILEC exchanges throughout this province, you can readily see that the geographic areas serviced by the SILECs are dominated by agriculture and very small communities.

2918 Aside from TBayTel, these SILECs have no large, lower cost urban centres within their operating territories. The villages or small communities within the SILEC operating territories, while they do represent a large percentage of the SILECs' customer base, typically contain no more than 100 to 200 households, and typically contain only small businesses.

2919 Despite the operating challenges that SILECs confront, our customers are not penalized for living in rural or northern Ontario. SILECs offer a full range of services to our customers, including local and long distance services, call management services, high-speed Internet and, depending on the company, IPTV or Cable TV, home and business security and mobility services.

2920 SILECs have a deep and abiding focus on their incumbent operating territories. They have long-standing and deeply-rooted commitments and obligations to the communities they serve. They make careful and deliberate technology decisions that facilitate the provision of services across their entire serving territory. Sometimes this involves the provisioning of services to customers in circumstances where, in another time and place, it would not make good business sense.

2921 SILECs have local business offices. Our senior management and our staff live in our communities and our customer service staff and technicians are locally-based.

2922 The current SILEC regulatory framework employs a complaints-based retail quality of service regime. As we appear here today we note with pride that there are no unresolved consumer complaints currently before the Commission. In fact, customer complaints to the CRTC have been virtually non-existent for more than 14 years.

2923 I will now hand over the discussion to my colleague, Rob Olenick.

2924 MR. OLENICK: Thank you, Paul.

2925 This picture of the SILECs would not be complete without a quick glance at the areas surrounding our operating territories. In this proceeding we have filed evidence demonstrating that the large ILECs are focused on the urban areas of the province.

2926 The SILECs priorities, however, are deeply rooted in rural Ontario. Let's look at two examples, accessibility to broadband services and customer service responsiveness.

2928 Good news spreads, it's no surprise that SILECs often receive requests from individuals residing or working outside of our operating territories for access to SILEC broadband.

2929 Let's look at customer service levels.

2930 SILEC customer service response times are typically a fraction of those available from the large ILECs in surrounding exchanges, due in large part to the local presence of the SILECs. No other service providers are willing or able to match SILEC customer service response times in rural Ontario.

2931 As we noted earlier, with the exception of a few wire centres in TBayTel's operating territories, SILEC operations have been found by the Commission to be exclusively high cost.

2932 Throughout this proceeding, we have filed evidence to demonstrate for the Commission that not only do SILECs continue to require at least the existing levels of subsidy from the Central Fund, but that this investment is well worth it.

2933 Our joint evidence highlighted the fact that subsidy levels to SILECs dropped significantly between 2002 and 2006 and have remained frozen since 2007. During that time period, SILECs have continued to maintain their excellent service levels to rural customers and have contributed to the achievement of the policy objectives found in the Telecommunications Act.

2934 We will now move on to discuss each of the four main areas identified in the Appendix to your letter of 8 October.

2935 Keith Stevens of Execulink will begin the discussion.

2936 MR. STEVENS: Thank you, Rob, and good morning.

2937 In our view, the obligation to serve, or the "obligation" as we refer to it, and the existing basic service objective, or simply the "objective", remain important public policy tools that the Commission should use to fulfil its statutory mandate.

2938 In particular, in rural Canada the obligation and the objective have been fundamental to the achievement of at least two of the policy objectives found in the Telecommunications Act.

2939 The first is the creation of a telecommunications system that serves to safeguard, enrich and strengthen the social and economic fabric of Canada.

2940 The second policy objective is ensuring reliable and affordable services of high quality in both urban and rural areas of Canada.

2941 The OTA and TBayTel believe that the Commission should continue to impose the obligation on the incumbent wireline carrier in every SILEC operating territory.

2942 Similarly, the Commission should ensure that the wireline carrier with the obligation provides service levels equivalent to the existing objective.

2943 The large ILECs and cable companies have argued that the obligation should only be imposed on carriers in markets that have not been forborne. They argue that if the conditions are right for forbearance then competitive market forces will safeguard the interests of all customers in that market.

2944 Most of the major cable carriers have even gone so far as to suggest that the mere presence of a single facilities-based carrier in a market, be it wireline or wireless, could be enough to trigger the removal of the obligation. This goes too far. It ignores a key reality of life on the ground in any local residential telecommunications market and, in particular, it leaves subscribers in rural communities potentially stranded without access to basic services.

2945 We will address wireless services in a moment, but as far as competitive wireline networks are concerned, we don't believe that any competitive service provider is able to reach all customers in the market in the same way that the wireline incumbent already has. In other words, in every exchange across the country, there will always be a percentage of end customers who have no access to an affordable wireline alternative to the incumbent service provider.

2946 Furthermore, without the obligation, there will always be some end customers who will face the risk of having no service if a CLEC decides to exit a particular market and if the incumbent service provider makes the economic decision to cease offering service in a portion of a market.

2947 We don't believe that removal of the obligation would promote the policy objectives found in the Telecommunications Act. We also believe that access to basic telephone service in rural markets is simply too important to leave entirely to market forces and to an ex post or after-the-fact complaints-based system.

2948 SILECs are ready and willing to continue on with the obligation and the associated objective in their operating territories, regardless of whether they have been granted forbearance or not.

2949 SILECs have made the necessary investments to ensure that all of their customers have access to the same services and the same service levels.

2950 SILECs also support the notion that the obligation should include a "stand-ready" requirement to serve the entire exchange. By "stand-ready" we mean that the incumbent service provider maintains a network that is ready to serve all customers who request local service within its network footprint subject to the limits in its terms of service. In this way, all customers will be guaranteed access to basic telephony services.

2951 The OTA and TBayTel believe that in its current stage of evolution, and especially in rural areas of the province, wireless voice service cannot be relied upon exclusively to satisfy the obligation. Instead, wireless should be viewed as a complement to wireline service.

2952 Why do we hold this view?

2953 First, wireless services in rural areas lack consistent and uniform high quality and coverage. This was shown in the maps provided yesterday by SaskTel and NEOnet.

2954 Second, rates for wireless service are higher than for the same services available through wireline networks.

2955 Third, power issues rarely affect land line telephones, since they continue to run on current from the central office even during general power failures. The same cannot be said for wireless telephones.

2956 Finally, wireless services still do not deliver the same ironclad E9-1-1 services as wireline services.

2957 In our view, all of these issues argue against relying exclusively on wireless services to satisfy the obligation and the objective.

2958 I will now ask Tracy Cant of Ontera to discuss whether to include high-speed Internet access service within the objective.

2959 MR. CANT: Thank you, Keith.

2960 We move next to the issue of determining the role of the Commission in relation to the extension of high-speed Internet access services to all Canadians.

2961 The OTA and TBayTel note that high-speed Internet access is available to 94 percent of OTA member company's and TBayTel's end customers. The percentage of availability for each of the individual companies is actually much better than 94 percent in the majority of cases. We are very proud to note that, in many cases, current broadband availability is 100 percent.

2962 By comparison, we note that in Bell Aliant's Central region, DSL is only available to 41 percent of residential NAS in Aliant's Band "E" and 49 percent of residential NAS in Aliant's Band "F". Bands "E" and "F" are those areas within which SILECs operate.

2963 Given the very high penetration levels for high-speed Internet access services in our companies' operating territories, we respectfully submit that there is no need for Commission action of any kind in relation to the SILECs.

2964 OTA members and TBayTel are committed to continuous upgrading of our facilities, not only within our own territories but beyond, into geographic areas where the large ILECs have not made the necessary investments. The SILECs' roll-out of broadband has been gradual, strategically matching our resource allocation with customer demand. We have been keenly aware that any spikes in capital spending could detrimentally affect our overall financial viability.

2965 Looking beyond the boundaries of our SILEC operating territories, the OTA and TBayTel note that there is already a variety of federal and provincial government programs designed to fill the gaps in broadband coverage. Some of the SILECs have already participated in these programs.

2966 Extension of broadband coverage appears to be a priority of the current government, as reflected in the inclusion of broadband funding in recent Speeches from the Throne.

2967 As a result, the OTA and TBayTel submit that the Commission should not include high-speed Internet services in the objective. Instead, the Commission should leave it to the various levels of government to achieve this national priority through government subsidy programs.

2968 However, if the Commission does choose to establish a national broadband target and to mandate the provision of high-speed Internet service in areas where it is currently not provided, there must be adequate funding available.

2969 We can assure the Commission from our own recent experience that this is no small endeavour. It will be incumbent upon the Commission to either set up a new fund specifically for this purpose or else make the necessary inter-governmental arrangements to deploy general government revenues. The OTA and TBayTel note that MTS Allstream has estimated the cost of such a project to be anywhere from $9 billion to $15 billion dollars, submitted previously in evidence and updated recently in their evidence.

2970 With all due respect, the telecommunications industry cannot and should not be asked to bear this burden through the existing tax on contribution eligible revenues of telecom service providers.

2971 I will now ask Jonathan Holmes of the OTA to address the issue of reassessing the local service subsidy regime and the question of what changes, if any, are required.

2972 MR. HOLMES: Thank you, Tracy.

2973 This proceeding presents the Commission with the opportunity to reevaluate the purpose of the high-cost serving area subsidy and to reset various components of it to achieve a more narrowly focused and appropriate set of goals.

2974 We propose certain changes to this regime. We believe that our proposals for change are necessary to ensure that our companies will receive the subsidy amounts that SILECs require to continue to provide service to our customers. If adopted by the Commission, the changes that we have proposed would direct subsidy dollars to the carriers that maintain the obligation, that shoulder the requirement to stand-ready and that fulfil the objective.

2975 I will ask Angela Schneider of Hay Communications to continue our discussion of the subsidy regime.

2976 MS SCHNEIDER: Thank you, Jonathan.

2977 A key difference between the SILEC and the large ILEC subsidy regimes is a de facto implicit subsidy regime built into the rates for SILEC toll interconnection trunks and switching and aggregation services.

2978 The SILECs' costs to provide these services are indeed higher than those of the large ILECs. In recognition of this reality, the current SILEC rates for these services have been set significantly higher by the Commission than prevailing industry rates for similar services.

2979 In 2009, the SILEC regulatory regime was up for review by the Commission. The SILECs as a group, on the recommendation of the Commission, approached Bell Canada in an effort to develop a proposal for the Commission to consider as a component of the next SILEC regulatory framework.

2980 The focus of that proposal was on the size of the SILEC subsidy pool. Specifically, the SILECs' proposal addressed how the Commission should deal with the difference between current SILEC toll interconnection rates and the prevailing industry rates. The intent of the proposal was to promote the prospects for long distance competition in SILEC operating territories through lower interconnection rates.

2981 At the outset, the OTA and TBayTel must emphasize the fact that SILECs continue to need subsidy at roughly existing levels. With very few exceptions, we operate exclusively in high-cost serving areas. Our costs of providing dependable, high quality telephone services to our customers in these rural areas of the province have not declined over the last four to five years of the present regime.

2982 Our 2009 proposal sought to have the Commission transfer to the subsidy fund the difference between the annual revenues from the existing SILEC toll interconnection regime and, as a proxy, the Bell Canada's rates for direct connection service and Metropolitan IX rates found in the Bell Competitor Digital Network services tariff.

2983 To this extent, the size of the SILEC subsidy pool would have been increased under our proposal. We estimate that approximately $11.5 million would have been transferred to the subsidy pool.

2984 However, at the same time, SILECs would have raised their local rates by up to $3 per month to a ceiling of $30, which in our view is the maximum affordable local rate for local services.

2985 We proposed that the size of the SILEC subsidy pool should then be reduced by 75 percent of the initial rate increase. We felt that a scaled down reduction of the subsidy pool was both appropriate and balanced in this case.

2986 This aspect of our proposal, in our view, would contribute to the Commission's efforts to reduce the size of the national subsidy pool. However, it would also reflect the market reality that each SILEC would likely be unable to implement the full price increase across its entire operating territory due to competitive pressures from imminent local competition.

2987 We believe that shifting the revenue differential between the SILEC's direct connect and toll trunk rates and Bell's direct connect and toll trunk rates to the central fund is soundly grounded in the Commission's rationale for subsidizing local rates.

2988 Access to toll services is a feature of the objective. Accordingly, it is appropriate that the toll interconnection revenue differential be added to the subsidy pool to help fund the provision of residential basic service in the SILEC's high-cost serving area operating territories.

2989 Bell Canada's proposal to increase local rates with the goal of eliminating subsidy in Bands "E" and "F" will not work for the SILECs. For SILECs, our local rates would have to increase unreasonably and to unaffordable levels merely to absorb the elimination of the subsidy. In many cases the rate to cover the high-cost serving area subsidy would need to be over $40 per month.

2990 SILECs could also face the possibility of having to further increase local rates to recover our local competition start-up costs.

2991 The third problem that SILECs would confront from the Bell proposal relates to the inevitable downward pressure on local rates in the core of our exchanges, via the doughnut effect, with the advent of local competition.

2992 The introduction of local competition, combined with the elimination of subsidy as proposed by Bell Canada, would result in too large a financial blow for SILECs to support for any period of time.

2993 The SILECs negotiated our 2009 proposal with Bell Canada and its related companies, all of whom supported the proposal throughout the proceeding that examined the next SILEC regulatory framework.

2994 We would also note Bell Canada's continued qualified support in this proceeding for the principle of transferring the difference between existing SILEC toll interconnection rates and Bell Canada's toll interconnection rates to the central fund.

2995 In its response to an interrogatory from OTA and TBayTel, Bell, speaking for itself and Bell Aliant, states that if the Commission was to reject Bell Canada's subsidy proposal, Bell and Bell Aliant would instead support the adoption of the SILECs' 2009 proposal.

2996 Support for the idea of transferring implicit subsidy to the central fund is now also supported by two of the major cable companies, namely Rogers and Quebecor.

2997 In the current proceeding dealing with the termination of CLEC toll traffic into SILEC operating territories via the local transit services of Bell Canada, both of these companies have supported the transfer of implicit subsidies such as this to the central fund. Distributel has also voiced its support for this principle.

2998 The OTA and TBayTel have rethought our position on the issue of subsidy portability in SILEC operating territories.

2999 Our 2009 proposal stated that only CLECs with fewer than 20,000 NAS should be eligible for subsidy in our operating territories. It is now our position that subsidy should be limited to the incumbent carrier with the obligation. It would be unfair to provide subsidy to those CLECs that do not incur the costs of the obligation or the stand-ready requirement.

3000 CLECs will enter an exchange only where there is a valid business case for doing so. The elimination of the portable subsidy would not deter economically efficient entry into SILEC markets. Dipping into the subsidy pool funds to incent competitive entry into the local market is an inappropriate use of the Central Fund, and seems to violate any notion of competitive neutrality.

3001 Since this latter point relates in part to local competition, this seems to be a useful point to move on to the final topic in the Appendix of your letter of 8 October, that being the re-examination of local competition within SILEC territories.

3002 I will now ask Keith Stevens of Execulink to begin the presentation of the OTA position on local competition.

3003 MR. STEVENS: Thank you, Angela.

3004 At this point I would like to remind the Commission that the following views on local competition constitute the position of the companies represented by the OTA in this proceeding, but not TBayTel. TBayTel has filed separate evidence on the issue of local competition and its position on the matter will be presented by my friend Robert Olenick.

3005 The impact of local competition on OTA members has the potential to be very damaging, given the small customer bases of the OTA members we represent and resulting questions about our ability to absorb significant market share losses.

3006 Four of the SILECs the OTA represents in this proceeding have fewer than 2,000 NAS, 10 have between 2,000 and 5,000 NAS, three have between 5,000 and 7,000 NAS, and only one has over 10,000 NAS.

3007 The problem of a small customer base is for some companies compounded by seasonality. Seasonality relates to the ebb and flow of NAS counts and the revenues throughout the year due to cottage country traffic during the summer months.

3008 Some SILECs are heavily impacted by seasonality during the winter months, many for up to six months of the year. This means that these customers provide the SILEC with no PES or optional local services for half the year. For example, WTC Communications loses 30 percent of its NAS during the winter.

3009 While the large ILECs have faced financial pressure from local competition, they nonetheless have the ability to absorb competitive impacts across their customer base of millions of customers. This is a benefit that we refer to in our evidence as "cross-market subsidization".

3010 The existence of cross-market subsidization in Canada is substantiated by a number of parties to this proceeding. For example, NorthwesTel states:

"In addition to the current subsidy mechanism and other elements of the price caps regulatory framework implemented in the north, Northwestel's business model utilizes cross subsidies from higher margin services, largely in our two largest centres, to sustain the obligation to serve."

3011 While larger companies have the opportunity to cross-subsidize losses in one market with revenues from another market, the SILECs do not.

3012 We have spent a great deal of time discussing what we call the doughnut effect in this proceeding. Simply stated, the doughnut effect can occur when a CLEC enters the core of our exchanges and manages to skim a significant percentage of a customer base. As a result, the SILEC is left in a position where it has to compete in the core and all the while continue to offer service to the higher cost customers outside the core.

3013 We anticipate that most competitive entry into our operating territories will be by cable TV providers. We also anticipate that scenarios such as this will require SILECs to focus on the core at the expense of our serving territory outside the core.

3014 Some parties to this proceeding have expressed skepticism regarding our concerns over the doughnut effect. However, we do have Canadian evidence that points to our predicted outcome. Competition from the cable companies in large ILEC operating territories has hit those companies the hardest in urban areas, where cable networks are most prevalent.

3015 In response, we note that Bell Aliant's capital expenditures are now focused on the highest density areas of its operating territories -- namely, on fibre optic projects in the urban and suburban cores, or the hole of the doughnut. There is very little, if any, capital focus that we can see on the outlying areas of their networks.

3016 Bell Aliant clearly feels that it needs to focus on the areas of greatest competitive threat - essentially the various cores of its operating territory. This is only natural because capital budgets are limited and difficult decisions have to be made concerning the allocation of scarce capital resources.

3017 This point was made repeatedly by Bell Aliant in its presentation on Tuesday.

3018 Contrast this with Bell Aliant's evidence in this proceeding regarding the state of its network outside the core of its serving areas:

"It is clear that the Bell Aliant Companies have delayed replacement of their existing plant as long as possible. They are now faced with significant replacement expenditures."

3019 Just as Bell Aliant is now focused on higher density core areas at the expense of the rest of its operating territory, the SILECs will confront the same predicament in the face of local competition -- either concentrate investment in the core or lose more and more customers, while attempting to maintain current service levels throughout their exchanges.

3020 I would ask Jonathan Holmes to continue our presentation on local competition.

3021 MR. HOLMES: Thank you, Keith.

3022 In light of these and other concerns about our ability to maintain our financial viability, the OTA has suggested several changes to the framework for local competition established by the Commission in 2006.

3023 It is safe to say that in 2006 the Commission and the SILECs themselves believed that local competition would come via CLECs using the collocation/unbundled local loop model. No one could have anticipated the enormous and sudden impact that would result from cable company entry using their networks.

3024 One key aspect of the SILEC local competition regime established by the Commission in 2006 that we still strongly support is the case-by-case review mechanism of implementation plans. However, by its very nature, the existing case-by-case approach breeds uncertainty for SILECs, for would-be entrants, and for customers alike.

3025 The OTA has given thought to a way to keep the case-by-case review process alive within a local competition regime that creates more certainty for all stakeholders. In that context, we reviewed the Commission's own approach back in 2009, when you questioned individual SILECs on the impacts of local competition. That approach has led us to refine the case-by-case process, so as to allow the Commission to deal quickly with the backlog of cases currently pending before you.

3026 In a follow-up proceeding to this one, we believe that two categories of SILECs should be created by the Commission, based upon certain market and financial criteria, and that the Commission should assign each SILEC to one of the two categories in a follow-up proceeding.

3027 The SILECs in Category 1 are those companies where local competition should simply not be allowed, based on the application of these criteria. Those SILECs eligible for Category 1 consideration are those companies with less than 2,500 NAS. The following three criteria would then be used by the Commission to determine whether these eligible SILECs actually qualify for Category 1. Those SILECs with less than 2,500 NAS that satisfy the three criteria would be assigned to Category 1, while those that do not meet the criteria would be considered along with the Category 2 SILECs.

3028 The three criteria in question are:

3029 First, the size of the potential market susceptible to local competition from new entrants;

3030 Second, the significance of the expected SILEC upfront costs of local competition in comparison against the SILEC's overall financial metrics;

3031 Third, the SILEC's ability to absorb the expected impacts of local competition and remain financially viable.

3032 We will move on to the treatment of Category 2 SILECs in a moment. First, though, we want to speak to the issue of the Commission declaring certain SILECs to be Category 1 "no-compete" zones in light of the Policy Direction and the Telecommunications Act.

3033 The impact of the Policy Direction on Commission decisions has been nothing short of profound. The Commission has embraced its duty under the Policy Direction to allow market forces to determine outcomes to the maximum extent possible, through the continuous introduction of local competition and forbearance and through an exceedingly light-handed regulatory approach.

3034 However, there are limits to the application of the Policy Direction and its market forces dictate. One of those limits is the statutory objectives of the Telecommunications Act. The Commission simply cannot implement the Policy Direction if to do so would violate Parliament's objectives set out in the Act.

3036 And, we would respectfully submit that there is a third constraint on the Commission's reliance upon market forces, and that is plain old common sense. In other words, in this context, the Commission must ask itself whether it could ever have been Cabinet's intention in formulating the Policy Direction that local competition must be introduced in all markets, regardless of the consequences.

3037 This is not a radical concept. The Commission has already effectively declared one company to be a "no-competition" zone, using an analytical approach similar to our proposed approach.

3038 Notwithstanding the clear market forces intent of the Policy Direction, the Commission determined in a 2007 decision that it was not appropriate under prevailing circumstances to permit facilities-based local competition in the operating territory of Northwestel. In that decision -- issued after the Policy Direction -- the Commission stated as follows:

"...in order to implement facilities-based local competition, Northwestel would be required to implement significant modifications and enhancements to its network. The Commission also notes that the associated costs would be substantial and that the company may not be able to recover these costs. In light of the above, and the limited likelihood of competitive entry, the Commission concludes that it would not be appropriate to require Northwestel to implement facilities-based local competition in its territory at this time."

3039 In this decision, the Commission did the right thing in evaluating the extent to which Northwestel was able to tolerate local competition and remain financially and operationally viable. The OTA believes that the Commission must take a similar approach to the introduction of local competition in the territories of the SILECs. The competitive imperative of the Policy Direction cannot be permitted to erode the statutory objective of affordable universal service in high-cost areas.

3040 It is not particularly surprising that there might be some tension between the goals of the Policy Direction and the goals of the Telecommunications Act. Nor is it surprising that the SILECs' operating territories, similar to the territory of Northwestel, are where that tension is most manifest. Viable and strong SILECs contribute to the achievement of the policy objectives of the legislation. Imposing local competition on the SILECs in pursuit of competition benefits under the Policy Direction can, in certain circumstances, undermine the achievement of the policy objectives of the Act.

3041 We respectfully submit that to do so in our Category 1 SILECs' operating territories would achieve exactly that undesirable and, indeed, unlawful result.

3042 Paul Downs, of Nexicom, will now address the remaining category of SILECs, the Category 2 companies, being those (i) with greater than 2,500 NAS, and (ii) those with less than 2,500 NAS that do not satisfy the three criteria to be included in Category 1.

3043 MR. DOWNS: Thank you, Jonathan.

3044 In the follow-up hearing mentioned above, the Commission should assess the circumstances of each of the remaining Category 2 SILECs using the same three criteria as were used to assess the Category 1 companies, with one important difference. The Category 2 SILEC assessment would take place not on a company-wide basis, but rather on an exchange-by-exchange basis.

3045 Following the Commission's decision in a follow-up proceeding, there would finally be a degree of certainty for all stakeholders relating to the introduction of local competition into the territories of all SILECS. Everyone would know at this point that the operating territories of certain SILECs - the Category 1 companies - were simply off limits to local competition at this time, similar to the current situation in Northwestel.

3046 Everyone would also know with certainty which of the exchanges of the remaining Category 2 SILECs were now open to local competition and which were not.

3047 New entrants could simply elect to enter those SILEC Category 2 exchanges where the Commission has determined, on balance, after a careful, case-by-case assessment, that competition benefits outweigh any operational and financial concerns the SILECs in question may have.

3048 Competitive entry in SILEC Category 2 exchanges would only be subject to the same kinds of technical interconnection discussions between the parties that need to occur today, prior to entry into a Bell Canada local exchange. Local competition may begin at once.

3049 However, there are two safeguards that the Commission must put in place as prerequisites to opening up SILEC Category 2 exchanges to local competition. They are as follows:

3050 First, SILECs should be granted forbearance immediately upon market entry by one CLEC competitor in the exchanges opened to local competition.

3051 Second, the Commission must approve the OTA/TBayTel proposal in this proceeding regarding toll trunks and minutes and increasing the size of the subsidy pool.

3052 We urge the Commission to exercise caution in relation to local rate increases for local competition cost recovery, and to accept that rate increases are not the answer to all problems in a competitive market. For one thing, both the OTA and TBayTel have already proposed a rate increase in the context of our joint subsidy proposals in this proceeding. We can ill afford to sustain another rate increase to recover our costs to facilitate local competition.

3053 TBayTel has already been given an exogenous factor that it hasn't translated into local rate increases because of competitive pressures. Even with 71,000 NAS, TBayTel has concluded that it cannot increase local rates in the face of a competitor. We remind the Commission that competitive neutrality under the Policy Direction cuts both ways.

3054 That concludes the OTA's presentation on local competition, but before handing the microphone over to Robert Olenick of TBayTel to present his company's position on that topic, I would like to conclude with a brief statement on the SILEC Wireless Number Portability regime.

3055 We believe that the Commission made a fundamental error when it failed to require WSPs to physically interconnect with each SILEC for intermodal porting. By instead relying on unrelated interconnection arrangements between SILECs and Bell, the Commission decided to treat SILECs and their operating territories as part of the ILECs' networks, rather than as separate and distinct from them.

3056 Unlike Bell Canada, the SILECs receive no compensation for the costs incurred to route this traffic. The Commission must recognize that SILECs are carriers equal in stature to the large ILECs and are entitled to compensation.

3057 Equally important to the SILECs is the recognition that competitive entry into SILEC operating territories must be via intercarrier agreements, not via a free ride over third party interconnection agreements.

3058 Robert Olenick will now present his company's position on local competition.

3059 MR. OLENICK: Thank you, Paul.

3060 TBayTel is owned by the City of Thunder Bay and serves the city and 21 surrounding municipalities and townships.

3061 In 2004, a city bylaw created the Municipal Services Board - "TBayTel" - that could take a progressive, proactive approach to the provision of telecommunications and related services on an arm's length basis from the City of Thunder Bay.

3062 Thunder Bay is located in northwestern Ontario, on the northern shore of Lake Superior, about 600 kilometres north of Minneapolis, and between 700 and 800 kilometres east and west of Winnipeg and Timmins, respectively.

3063 Even though TBayTel is one of the larger SILECs, it is still a small independent incumbent carrier, facing many of the same issues that my colleagues have previously described.

3064 However, on the matter of local competition and Wireless Number Portability, TBayTel comes to this proceeding from a different perspective than most of the SILECs. It is one of only three SILECs within whose territories the Commission has already approved the implementation of local competition, and it is also the only SILEC of the three in question that is not affiliated with a large telecommunications service provider.

3065 After almost ten years of discussions regarding local competition, the Commission, on March 29, 2006, in Decision 2006-14, opened up all SILEC serving territories to potential local competition. Within days of that decision, TBayTel had its first request for local network interconnection, and by the end of the first week of May, it was working with two companies to make local competition a reality.

3066 With the guidance of Commission staff, TBayTel's implementation plans were completed, and local competition began in February 2008.

3067 TBayTel has always looked forward to the challenges of competition, as long as the game could be played on a level playing field. Accordingly, TBayTel fully implemented local competition, inclusive of local number portability.

3068 Since TBayTel was one of the original group of carriers supporting Wireless Number Portability, it is not surprising that it was deployed pursuant to Commission directives.

3069 Even though the SILECs have generally been open to the Commission's desire for local competition, it is now apparent, not only to some of the SILECs, but also to the Commission, that the stark reality of potential financial instability makes local competition in its current form less desirable.

3070 The Commission's recognition has led to this proceeding and the re-examination of the local competition and WNP frameworks in the territories of the SILECs.

3071 TBayTel believes that local competition and local number portability should continue to be introduced in the SILEC markets, using TBayTel's Implementation Plan, as modified by the Commission, as a guideline. The Commission's modifications regarding TBayTel's proposed cost recovery alternatives made the plan consistent and compliant with the Policy Direction.

3072 At the time, the Commission considered that to allow TBayTel to recover start-up costs from competitors would not be competitively neutral.

3073 Furthermore, the Commission found that the level of TBayTel's rate increase and resultant rates to customers were not sufficiently excessive to promote economically inefficient competitive entry, and therefore would interfere with the operation of market forces to the minimum extent necessary.

3074 Implicit in the SILEC Implementation Plan is the concept that each plan would be developed on a case-by-case basis, in response to individual, bona fide, requests for local interconnection. Only after a positive determination is made should an implementation plan go forward.

3075 As we have already discussed, a regulatory regime has been established for the SILECs that is somewhat different from the ILECs. The Commission has consistently designed regulatory frameworks that match the circumstances of each industry group or, as required, developed mechanisms specific to particular companies.

3076 The OTA/TBayTel proposals regarding the obligation, the objective and the local subsidy do not require special considerations. Rather, the suggested changes only require tweaks to the existing regulatory environment, while continuing to maintain and/or enhance the delivery of services to rural areas, and to support the financial viability of the SILECs.

3077 The SILECs should retain the obligation, even in the event of competition in SILEC territory.

3078 Accordingly, the SILECs should remain solely eligible for the High Cost Serving Area Subsidy. As well, as the carrier of last resort, the SILECs will be standing ready to provide service if a competitor departs the market, and for this reason the SILECs should be entitled to recover the costs to stand ready.

3079 The objective is tied to the obligation and, similarly, must be retained in competitive/forborne areas.

3080 Once local competition is introduced, customers in non-core areas of an exchange, without the benefit of competitive entrants, will see their access to basic services erode.

3081 Therefore, to meet the obligation and continue to provide the components of the objective to all customers within all SILEC exchanges, a SILEC subsidy mechanism has to be retained and increased as necessary.

3082 In conclusion, by reviewing each CLEC expression of interest, and by following the Commission's parameters and factors contributing to Policy Direction compliance, the appropriateness of competitive entry in a SILEC serving area can be determined.

3083 Further, the OTA/TBayTel proposals regarding the obligation in all markets, as combined with the objective, and subsidized as suggested, would interfere with the operation of market forces to the minimum extent necessary.

3084 I will now turn things over to Jonathan Holmes to conclude our joint presentation.

3085 MR. HOLMES: Thanks very much, Robert.

3086 And thank you, Mr. Chairman and Commissioners. That constitutes the joint presentation by our panel on behalf of the OTA and TBayTel. Our panel members are now ready to respond to questions from the Commission. I would like to request that you direct your questions to me, and I can bring the other members of the panel into the discussion, depending on the topic.

3087 THE CHAIRPERSON: Thank you for your presentation.

3088 On page 5 you make the statement that broadband is nearly 100 percent in SILEC operating territories. What is your definition of "broadband" when you make that statement?

3089 MR. HOLMES: I think we have a two-part answer to that question. I will answer part of it, and then turn it over to Tracy.

3090 The stats in that particular paragraph are based on broadband being anything over and above dial-up internet. So it could include light services and services faster than that.

3091 MR. CANT: Yes, and just to go a bit beyond that, to the point of what a broadband standard could evolve to, we could see broadband commencing at 1.5 megabytes as an aspirational target, and then evolving as we go forward to the 2020 timeframe to a 4 to 5 megabyte service.

3092 And that's a download speed, essentially.

3093 THE CHAIRPERSON: On page 8 you say that 94 percent of OTA and TBayTel customers have high-speed internet, and on page 5 it's --

3094 So that's not 1.5. It is up to 1.5, if I understand your answer.

3095 MR. CANT: It is actually, for the customers that are represented on page 8, or the customers in those SILEC areas -- again, it covers everything greater than dial-up speed.

3096 For example, in Ontera's area, we have customers that are at 500 kilobytes per second on download, up to in excess of 5 to 6 megabytes in some cases.

3097 So it covers that full spectrum at that 94 percent, but it is certainly above dial-up.

3098 THE CHAIRPERSON: You have been here the whole week, you heard the discussion we had on a target for broadband, and you heard me quote what other nations have done, et cetera, and we are all firmly of the view that people in rural and remote areas should not have less than other areas.

3099 Surely, more than dial-up is not exactly a winning goal or something to aspire to.

3100 Take whatever timeframe you want, but what is a reasonable goal to aspire to for people in your territories?

3101 MR. CANT: We believe that starting at 1.5 megabytes is a good aspirational target within the short term, so the two to three-year timeframe.

3102 Beyond that, as I think I mentioned a few minutes ago, evolving to 4 to 5 megabytes over the timeframe to 2020.

3103 Certainly, though, we acknowledge --

3104 THE CHAIRPERSON: 2020?

3105 MR. CANT: Yes.

3106 THE CHAIRPERSON: Ten years.

3107 MR. CANT: Yes.

3108 We have loops within our exchanges which are dozens of kilometres long, so, honestly, there are situations where there is no business case ever to provide broadband. We would not have access, necessarily, to the alternatives fully to do that.

3109 So to try to comprehensively establish a target that we could meet, we feel that 4 to 5, over that ten-year timeframe, is reasonable.

3110 THE CHAIRPERSON: But you have heard the evidence here all week long about wireless and satellite, and it is a near substitute in some cases, it is a full substitute, et cetera.

3111 Let's say, for argument's sake, if the goal was 4 megabytes, and you say that because of your loop length that's not really meaningful, wouldn't that drive you into cooperation of doing fixed wireless or satellite or something with those companies for your remote customers?

3112 Isn't that an efficient way of doing it, rather than trying to do it all by wire?

3113 MR. CANT: There is no question that it is an efficient way to do it, in those situations, over those distances.

3114 Our experience with fixed wireless is similar to, I think, the evidence of MTS, as far as providing mobility coverage. You end up populating a lot of towers, depending on the geography that you are within.

3115 So I would suggest that in those very, very extreme situations, yes, we have to look at fixed wireless, probably in a public/private partnering arrangement, similar to what we have been through in some cases.

3116 Also, certainly we would have to consider satellite, but I think, as we also heard, installation costs for satellite services may put it out of the affordable range for those customers, even at the $700 installation charge, assuming nothing like fly-ins or things like that to get to the customer.

3117 THE CHAIRPERSON: You mention on page 11 that, for your territories, $30 is sort of the maximum affordable local rate.

3118 You heard Bell Aliant on the first day saying that they really feel that you should go to $36.50, or whatever it was, because that is the highest rate we have ever authorized in Val-des-Monts, and they obviously feel that for their territories, which are all around your territories, $36 would be an affordable rate.

3119 They are actually charging quite a bit less in some of their territories.

3120 You say $30. On what basis have you come to the conclusion that $30 is the maximum affordable rate?

3121 MR. HOLMES: We have been talking about the $30 rate for a couple of years with Bell Canada. It was a key part of our 2009 proposal.

3122 I think we would be hesitant -- and I will ask anybody who can chip in -- to go any higher than that, in the light of where our local rates are now, and in the light of the competition that is out there from things like VoIP and wireless service providers, and potential local competition down the line.

3123 If we were to move much above $30, or anything above $30, we would start to see erosion to alternate services that are out there right now.

3124 THE CHAIRPERSON: Are we sort of deluding ourselves by even talking about $30, because that suggests a single service. Aren't most of your customers buying bundles?

3125 MS SCHNEIDER: I think, yes, we have tried to offer bundles in some areas of our operations, but I think, for the customers at the extent of our territory, for customers that are seasonal and only looking for a basic telephone service, for customers that have significantly lower incomes, for retired customers, the bundle has not been an attractive alternative.

3126 We have seen some take-up on bundles, but not to the extent, I believe, that you might see in more densely populated urban areas.

3127 THE CHAIRPERSON: You make the proposal, in terms of competition, that we divide the SILECs into Category 1 and Category 2. On page 17 you say, first of all, that Category 1 has to be less than 2,500 NAS.

3128 Secondly, you specify three criteria. All of these criteria are qualitative. There is nothing quantitative, nothing objective here. What SILEC with 2,500 customers would fail to pass these three criteria?

3129 I don't even know how I would apply it and how I could ever come to the conclusion that, yes, this SILEC, of 2,500, actually should be exposed to competition.

3130 Walk me through a theoretical situation where that would be the case. I find these criteria relatively unhelpful.

3131 MR. HOLMES: I would be glad to do that.

3132 With regards to Category 1, we use an assessment starting with CLECs at 2,500 NAS. The first criteria, the size of the addressable market -- I can give you an example. I can't name the company, because it goes into a little bit too much detail on the public record with regards to their residential business split.

3133 One OTA member has three exchanges, and in only one of the exchanges is a cable company, which, we view, is the primary competitive threat.

3134 There are less than 800 residential customers in that particular exchange, where the cable company is, and only about 50 percent of those customers are addressable by the cable company.

3135 So the addressable market for that company is between 350 and 400 NAS, and this company also experiences some seasonality.

3136 So we think that looking at requiring that particular company to implement local competition, based on the addressable market, just -- it doesn't make a lot of sense to us.

3137 I will skip to the third criteria, and maybe I'll pass it over to Angela with regards to the SILECs' ability to absorb the expected impacts of local competition and remain financially viable.

3138 MS SCHNEIDER: So we did review a particular example of an OTA member company that operates one exchange with one significant urban built-up area, municipal area. They have approximately 2,300 NAS. Approximately 450 of those are business, around 1,800 are residential.

3139 They currently have received a request for CLEC entry by the cable operator who has operations within that built-up area. Our estimates are that the cable company overlaps approximately 50 percent of the NAS.

3140 Projections for this particular OTA member company of a loss of residential customers, that's 30 percent of the potential that the competitive cable entrant could hit, would change their operating results from essentially a breakeven result to a loss position of around $230,000.

3141 This company could not sustain that for more than a year or two and would essentially be driven out of business.

3142 THE CHAIRPERSON: Well, you have just demonstrated what I said.

3143 MS SCHNEIDER: Yes.

3144 THE CHAIRPERSON: This criteria that nobody can -- every single one under 2,500 will be in Category 1. There isn't a situation where you have a SILEC with 2,500 where you apply those criteria and you say, "Oh, no, they can -- competition. They cannot force number portability. Let them in". I mean you might as well just say 2,500.

3145 MR. HOLMES: That is a possibility. We need to emphasize that we really like and we really support the case-by-case approach. So what we would see happening is that --

3146 THE CHAIRPERSON: Well, let me tell you, I don't. Categorically and fervently, I don't like case by case. I want rules, not special deals for special companies. You will always be accused as a regulator of making special deals for special companies if you case by case.

3147 I want to have a formula. I want a principle that you apply. I don't -- any one of these three here is subjective and I cannot see how you can possibly have a NAS of 2,500 -- a SILEC with 2,500 NAS which applying these criteria you would say, "Yes, you should be our case competition".

3148 So if you want to say anybody under 2,500 is too small; therefore don't bother, you know at least it's a rule. It's a principle.

3149 And then next thing you are saying the economics are so fragile and the margins are so small it doesn't make sense. I can't do it.

3150 But I don't know why you want to go through the -- want to apply these criteria which inevitably will drive you to the same result.

3151 I mean if I get it wrong please correct me. I just do not see how you can possibly have a case where somebody in applying these criteria would come out saying, "Yes, you are ready for competitive entry".

3152 MS SCHNEIDER: I think those comments are good. We just felt that we wanted to give some of the thought behind where the 2,500 was supportable.

3153 THE CHAIRPERSON: Okay.

3154 MS SCHNEIDER: I think that your suggestion is well founded.

3155 THE CHAIRPERSON: Len, you have got a lot of questions. Go ahead.

3156 COMMISSIONER KATZ: Thank you, Mr. Chairman. Good morning.

3157 I have got a number of questions. But I want to start with understanding who is in and who is out. You represent, I think, 25 members and I think your documentation initially said you are speaking on behalf of 21.

3159 Who is in and who is out, who are you representing; who are you not representing?

3160 MR. HOLMES: Great question. So the OTA currently has 21-member companies, two of which we are not representing in this proceeding and that is Intelecom and People's Tel.

3161 Where the 20 number comes from is with regards to the Joint Panel. It's the 19-plus TBayTel. That gives you 20.

3162 COMMISSIONER KATZ: So if there is 19 and TBayTel is 20, and you are not representing two, so there is 22 total members of the OTA?

3163 MR. HOLMES: There is 21 members of the OTA. TBayTel is not a member.

3164 COMMISSIONER KATZ: Oh, TBayTel is not a member.

3165 MR. HOLMES: That's correct.

3166 COMMISSIONER KATZ: Okay, sorry. But they are on your panel?

3167 MR. HOLMES: That's correct.

3168 COMMISSIONER KATZ: Okay.

3169 Are there any members of the OTA that are also members of CCSA?

3170 MR. HOLMES: I will ask Keith to reply to that.

3171 MR. STEVENS: Yes, there are.

3172 COMMISSIONER KATZ: You are one of them?

3173 MR. STEVENS: Yes, we are.

3174 COMMISSIONER KATZ: And your position in this hearing is that you believe that there should be competition in your territory?

3175 MR. STEVENS: Subject to approval by the Commission we are saying that for the companies that are less than 2,500 NAS, as we talked about earlier, the Commission should be -- competition should be through the approval process as approved by the Competition in 2006, yes.

3176 COMMISSIONER KATZ: How many of the 19 members have more than 2,500 NAS?

3177 MR. HOLMES: I will give you the opposite number. There are currently nine companies below that. So I guess that would be 10 OTA member companies would be above the 2,500 NAS count.

3178 COMMISSIONER KATZ: So your representation here today is that nine companies should not allow competition in their territory. They are Category 1s.

3179 MR. HOLMES: That could be the result after the --

3180 COMMISSIONER KATZ: I want your position, not what could be the case after the Commission's finding. What is it that you are standing for on behalf of your members?

3181 MR. HOLMES: We are standing for that 2,500 is probably a good cut-off and companies that -- like we are talking total corporate entities here that have less than 2,500 NAS would probably have a very, very difficult time absorbing the impacts of local competition.

3182 COMMISSIONER KATZ: Are any of those 2,500 member companies currently operating out of territory?

3183 MR. HOLMES: Yes, at least one of them are.

3184 COMMISSIONER KATZ: So they would prefer to see themselves as a monopoly but they have found the financial wherewithal to be able to move into adjacent territories and make the investment there?

3185 MR. HOLMES: I guess the motivation for even small companies with less than 2,500 NAS to expand have -- they have been motivated to do it throughout the years for a number of reasons.

3186 You know they were encouraged to expand -- SILECs generally have been encouraged to expand their businesses and offerings in order to mitigate the loss of subsidy that they have involved or that they have experienced since 2002.

3187 MR. DOWNS: Thanks, Jonathan.

3188 Maybe just to expand on that, I think where our proposal was which was to review each on a case-by-case basis, which does not sound like that's a good idea --

3189 COMMISSIONER KATZ: Bad idea.

3190 MR. DOWNS: -- would have looked at each of those companies.

3191 So as an example with a company, as Jonathan has referred, that would fall in that basket of the 2,500, in going through the three criteria it probably would have surfaced, I imagine, as a third item that the SILEC was financially viable in the consideration of should competition take place in that area or not.

3192 COMMISSIONER KATZ: But in this case you have got someone who has got less than 2,500 so that case by case wouldn't even, under your proposal, have been dealt with because they would have de facto been in a closed market.

3193 MR. DOWNS: Well, I --

3194 COMMISSIONER KATZ: I think is the way your proposal was put before us.

3195 MR. DOWNS: I would think the third criteria in the proposal where it says the SILEC's ability to absorb the expected impacts, would have been looked at in light of whatever other areas they are in and whatever their other businesses are.

3196 COMMISSIONER KATZ: Okay.

3197 You cite throughout your testimony this morning, the issue of financial viability. Maybe I should know this question.

3200 COMMISSIONER KATZ: So we would have the financial information to support the fact that if there were additional costs imputed for any one of your members in order to deal with LNP or interconnection that we could sort of look at the numbers and get a sense for whether that is really the case and to whom?

3201 MR. HOLMES: I believe in the context of the yearly contribution review there is some information that's filed. You know, they would be willing to file whatever information you would ask them in terms of -- in the context of a review process.

3202 COMMISSIONER KATZ: Okay. Throughout your evidence that I read, that you filed earlier this year, and some of it this morning as well, you talk about branching out beyond basic telephony services into offering broadband services. 94 percent of your customers have broadband access.

3203 Cable services, I guess, Mr. Stevens, you are offering some cable services as well and maybe others as well.

3204 Presumably all of these services or most of these services operate on the local loop backbone that currently is being used to provide basic telephone service and is being subsidized today?

3205 MR. STEVENS: That is not correct for the cable TV.

3206 Our cable TV that we operate, Execulink, is on a coaxial basis rather than twisted copper, a totally different system. Actually, we bought it a number of years ago from different companies so they are independent of each other in that regard from a technical point of view.

3207 COMMISSIONER KATZ: And your broadband service?

3208 MR. STEVENS: Broadband, where we offer it within our operating territory, it's on our existing twisted copper pair, yes. We are using DSL.

3209 But we offer broadband, some broadband, outside on a fixed wireless in areas which is a different process.

3210 COMMISSIONER KATZ: Yes, so help me.

3211 Over the years as new services have been introduced over the same backbone network and where before you were getting anywhere from $20 to $30 a month from a customer, you are now able in many cases to get as much as $75, $80, $90 from a customer.

3212 Is that roughly true?

3213 MR. STEVENS: On over the twisted copper plant, I don't think the number is that high because really what we have added to that twisted copper for a percentage of our customers is DSL, high-speed internet. The other services that have been added have not necessarily been using that backbone.

3215 MR. STEVENS: Yes, it could be. I don't have the number but, yes, it has gone up. I agree with you on that.

3216 COMMISSIONER KATZ: And that piece that has gone up provides a positive margin, a positive contribution to your business?

3217 MR. STEVENS: Well, we hope so when we make that investment.

3218 MS SCHNEIDER: I think in the case of DSL, our internet, it definitely would contribute to margin, just as it would in any other ILEC territory.

3219 COMMISSIONER KATZ: Okay.

3220 MS SCHNEIDER: In the case of some of the other services, not necessarily in the near term. We have had to take more of a longer term focus for return on our capital invested in those areas.

3221 COMMISSIONER KATZ: How many of your members that are represented in this proceeding actually have a wireless licence today?

3222 MR. CANT: All of us presumably have access to a wireless licence today. Whether we are operators of a wireless service is a different issue. We each have access to that spectrum.

3223 COMMISSIONER KATZ: So you have each gone and purchased that spectrum?

3224 MR. CANT: It was the original spectrum transferred to us as ILECs at the time.

3225 MR. HOLMES: I think -- yeah, I think we were granted it as a statutory licence.

3226 MR. STEVENS: These were the licences granted, I think, in 1986 to the wireline carriers across the country. At the same time that Bell and TELUS and SaskTel got theirs, we got one as well for the whole --

3227 COMMISSIONER KATZ: Was there not an obligation to turn it up in a predetermined period of years?

3228 MR. STEVENS: At that time there was not.

3229 What most of the OTA members have done is negotiated and made an arrangement with Bell that they are using our spectrum in our areas, is what has happened over the years. That started from -- early, actually. Bell was offering service before we came into the agreement, but over the years Bell has been offering a Bell Mobility server using our spectrum and our territories.

3230 COMMISSIONER KATZ: And they are paying you a licence fee of some sort.

3233 MR. STEVENS: It's not significant and it's up to try and negotiate to change that. But it's not a significant amount.

3234 COMMISSIONER KATZ: Okay.

3235 Could I ask you to file with us what that nominal fee is by member, in confidence presumably?

3236 MR. STEVENS: Yes.

3237 MR. HOLMES: Yes.

UNDERTAKING

3238 COMMISSIONER KATZ: Okay. We are going to have to take a short break. Apparently there is something that has come up for a few minutes, if you don't mind.

3239 We will break for 15 minutes -- five?

3240 THE CHAIRPERSON: Five.

3241 COMMISSIONER KATZ: Five minutes. Sorry.

--- Upon recessing at 1014

--- Upon resuming at 1021

3242 THE CHAIRPERSON: Okay. Sorry for the interruption. Let's resume.

3243 I think, Mr. Katz, you were asking questions.

3244 COMMISSIONER KATZ: Yes. Sorry about that.

3245 I have also been able to confirm at the break that you do file financials for subsidy purposes but you only file for revenues that are greater than $10 million so some of your members do not file at all.

3246 So could I ask you to put together a spreadsheet that actually has some consistent data on it for each one of your members?

3247 MR. HOLMES: Can I just ask in a little bit more detail, just general financial typical accounting --

3248 COMMISSIONER KATZ: Yes.

3249 MR. HOLMES: -- Type reporting information?

3250 COMMISSIONER KATZ: Just a P&L.

3251 MR. HOLMES: Okay.

UNDERTAKING

3252 COMMISSIONER KATZ: Okay.

3253 In that vein, and I guess some of you folks on the panel have got some engineering experience, help us understand what is involved in local number portability. Is that a software capability in a switch and if it is how difficult is it to upgrade the switches, how expensive is it to upgrade the switches?

3254 MR. STEVENS: Okay, I will answer. I will try to answer that, Mr. Katz.

3255 It is a software option on a switch but all switches aren't able to be upgraded with that software patch. An older switch, often DMS-10s or DMS switches are older style switches, aren't able or very costly, extremely costly to do upgrade to do that. The newer switches it's often included and the cost is not as large.

3256 The OTA companies and TBay fall in three categories in that regard. Some companies still are using an old switch and for all practical purposes it means replacing the switch to go to number portability.

3257 Others have a new switch which is capable and their costs would be much, much smaller to implement.

3258 And the third category is often those who are competing and may have two switches. They often have a lure switch where there -- as a CLEC where number portability is working.

3259 Execulink, in this category, we have an older switch that our SILEC companies are using. We are in the process of transferring them over to the newer switch over time through -- as capital budgets will allow.

3260 In our case we are doing that over five years. We are partly through that process. So some of our customers are WNP-capable and others are not but will be in a couple of years' time. We will be there for all of them.

3261 COMMISSIONER KATZ: Okay. Could I ask you, Mr. Holmes, to file with us a list of those companies that do not have the capability today to provide LNP so we can marry that against what you propose is a 2,500 NAS cut-off point, so we can see if anybody above that has got costs associated with LNP and those below it as well?

3262 So just give me a list of those that are capable of providing LNP and those that are not?

3263 MR. HOLMES: Okay. I think we may have filed an interrog response or two on that, but I can check.

3264 COMMISSIONER KATZ: Okay.

3265 MR. HOLMES: And make sure it's exactly what you are after.

UNDERTAKING

3266 COMMISSIONER KATZ: Okay, thank you there.

3267 I'm going to refer you -- I don't know if you have it with you there -- on April 26th, 2010 you filed I guess, answers to question 17 through to 21 on behalf of OTA. There is a statement in there that I found I couldn't understand. It was actually in response to question number 17 on page 5.

3274 COMMISSIONER KATZ: Okay. Go on page 5. It's in paragraph four towards the bottom of the page. It says four lines from the bottom:

"It is also important to note that customers in the outlying areas of SILEC-operating territories are less likely to demand higher-end service such as high-speed internet access..."

3275 And then you go on to say:

"...and would include a much smaller business component in the core of the exchange."

3276 I want to focus on the first part of it. What information do you have to support that statement that customers in outlying areas are less likely to demand high-speed services such as broadband? What's that based on?

3277 MS SCHNEIDER: It is based on our knowledge of our operating territories and the fact that most of what we term businesses are located in the core. Businesses do not tend to be setup at the reaches of our exchange.

3278 COMMISSIONER KATZ: Yeah, I am not focused on the business part of it. I'm focused on the first part of it, "Customers in outlying areas are less likely to demand higher-end service such as high speed". So you are saying that --

3279 MS SCHNEIDER: I think that "customers" was mostly focused on the business aspect.

3280 COMMISSIONER KATZ: Okay. So you do believe that customers, residential customers in outlying areas do need to have --

3281 MS SCHNEIDER: That would be my experience.

3282 COMMISSIONER KATZ: Okay. So this word "customers" is related to business, from your perspective, okay.

3283 I also note that, I guess, in your evidence this morning you talked about the fact that a large proportion of your customers are seasonal customers. They are cottagers.

3284 And I guess it begs the question: Should there be a different situation for cottagers who presumably have a propensity to pay for services because this is their second home? It's a seasonal home. Their income is higher as opposed to those that make their year-round life in a rural or a Band "E" or "F" territory.

3285 Why should they be getting a subsidy?

3286 MR. HOLMES: I see, okay.

3287 MR. DOWNS: I think, to answer your question, in our situation the seasonality and the seasonal customers are not -- they are living in mobile homes and so they are therefore, you know, six months of the year and then they go south for six months. So they are looking for, really, just a basic service. They rarely take any of the, you know, call management services or those types of features.

3288 So they are really looking -- quite honestly in the experiences we have is for a lifeline while they are there, that in case they need to call 9-1-1 they can do so. It happens in our instance and I think it is the case in others that those particular areas which are right on the water or the shoreline in our case do not have good cellular coverage at all.

3289 COMMISSIONER KATZ: So these would not be people who say, take an example, live in Winnipeg and have a cottage in Lake of the Woods and go there on weekends boating and whatever?

3290 MS SCHNEIDER: In Hay's operating territory it would definitely be a mix of the type of customer that Paul described and what you are addressing.

3291 I think the point that I would like to make is that Hay has approximately 5,600 NAS and those cottagers are intermingled with our fulltime seasonal customers as far as their geographic location. Out of those 5,600 it's erroneous to assume that I receive revenue on those 5,600 customers, all of them, for 12 months out of the year.

3292 We do find that they are more susceptible to, or more apt to choose a wireless substitution, and they are just a more vulnerable customer as far as our ability to continue to maintain revenue from them.

3293 COMMISSIONER KATZ: Okay. You quoted 94 percent of your customers have access to broadband, which is about the national norm of -- I guess it's 95 percent that we talked about yesterday.

3294 What about the last 6 percent? What are your plans to extend broadband to the rest of them?

3295 Have you spoken with satellite providers to see whether they can provide an adjunct to your services, much like we heard from SaskTel yesterday or are you going to be building out yourself?

3296 MR. CANT: Mr. Katz, Tracy Cant here, to answer that question.

3297 In our case, Ontera, we haven't so far worked with satellite providers. Certainly not because we don't want to, but simply because you know we had experience with satellite service where we used it for ourselves, in fact, and it wasn't workable at least with our VPN connectivity over the service to our office for employees.

3298 So we were reluctant to deploy to customers in some of the further reaches that I mentioned to the Chair in our exchange where we are over dozens of kilometres, you know, from -- distant from the CO.

3299 As far as plans going forward, the way I think a lot of our companies in Ontera are approaching it is on a -- not a case-by-case basis but I guess a business case-by-business case basis, to the extent that we can look at funding opportunities which we did do actually in our Marten River exchange where there is the component of money that is available to support an unprofitable business case, then that's the way that we would try to go about it.

3300 And I think, based on some of the things that we heard about satellite over the last couple of days assuming that service is available in the future, that may very well be, you know, the better, faster alternative to deal with those distant locations.

3301 COMMISSIONER KATZ: So there are plans to cover the last 6 percent of your customers?

3302 MR. CANT: Certainly, that is the case.

3303 As we try to work towards that objective of initially 1.5 megabits service and then as that standard obviously may evolve over time, you know, it would be out intention to try to get to that point to be able to cover our customers.

3304 COMMISSIONER KATZ: So now the tougher question. Have you got a target date by which the last 6 percent will have access?

3305 MR. CANT: At the 1.5 megs level the target date is within the next three years. Going beyond that, as we mentioned, to the 5 megabits service level looking at 10 years -- unless we are substituting satellite in every case.

3306 COMMISSIONER KATZ: I am just looking at getting to the 1.5 right now.

3307 MR. CANT: Yeah, yeah.

3308 COMMISSIONER KATZ: Is that synonymous across all the member companies?

3309 MR. STEVENS: If I could just comment.

3310 I mean the 20 companies are all quite different in both geography and terrain. Some companies already have 100 percent more than 1.5. I would say that all of the companies that have less than 100 percent are working to get that number to 100 percent.

3311 I think it's important to emphasize when we are talking about 94 percent coverage, we are 94 percent coverage of high-cost areas whereas the national average of 94 percent includes the Toronto's and Montreal's of the country as well.

3312 COMMISSIONER KATZ: But there are Canadians that are living in high-cost areas where we are talking about trying to provide them with state-of-the-art current broadband services.

3313 MR. STEVENS: Absolutely, and each of our members is working very hard to do that. As I said, some are there already and others are working on their plans.

3314 Some have a much more difficult job of doing it than others as well.

3315 COMMISSIONER KATZ: Is the three years that I heard from Mr. Cant reasonable for other members as a target?

3316 MR. STEVENS: I think it's reasonable, yes.

3317 MR. CANT: Speaking as one of the companies that unfortunately draws that average down, that is a realistic target for us.

3318 COMMISSIONER KATZ: Okay.

3319 My last question, or series of questions, relate to the customer. Everything you have talked about today is about the viability of OTA and I understand that if a member of OTA is no longer viable it may have implications on the customer.

3320 But nowhere have you talked about the tradeoff between maintaining what I will call a monopoly in certain markets with the benefits of competition to the consumer, the benefits of choice if somebody else wants to come into that market, the benefits of consolidation of the marketplace if some smaller players cannot economically survive. Then by this Commission maintaining their survival indefinitely through subsidies, does not allow the marketplace to mature through consolidation, acquisition, merger to the benefit of consumers who then may in fact have a stronger player to offer more and better services as well.

3321 That's a tradeoff that we have got to make in this Commission and nowhere in here do you talk about that, other than standby obligations that you may have in case somebody decides to close up shop because they are no longer viable.

3322 I mean we have dealt with that in the past in this Commission whenever companies have unfortunately gone out of business there has been a transition period. There has been work done by the Commission, by that company that experienced some degree of stress financially and by someone else coming in to takeover as well.

3323 So we have dealt with that component of it. I'm just looking at the consumer component and trying to understand.

3324 How does the consumer equation fit in here when you are asking us to sustain smaller players but in some cases it's at the expense of consumers' benefits as well?

3325 MR. DOWNS: Well, I think, to answer your question or to try to answer your question, what we have done as independents is of course provide our customers over the years with high quality service in meeting the Telecom Act and the objectives of the Act and we continue to do so.

3326 We are part of the community. We are an economic driver in the community. We employ people. We add to the community financially in many, many ways through support of charities and all the rest of it.

3327 We also have a very -- because we have been operating in providing those services for 100 years in our communities, we also have a very close association with the customer and to the services they are looking for and the needs they have.

3328 We have provided them with services that a larger ILEC would not be providing them, especially in the rural areas out of the core.

3329 So I think right now our customers in the case, they do have some competition. They have got cellular competition that they can go to. They have voice competition in the sense that there are customers in our area who over the high-speed internet are using VOIP services quite a bit; so competition does exist.

3330 I guess the concern is that if a focused attempt came into our areas and just took away the core then we would be in financial difficulty. We do not believe that at the end of the day that is best for all of the area we serve.

3331 Subsidies, I believe, will be required in whatever fashion forever to provide service to rural high-cost serving area customers. So I think that's a given, that we are key players in our communities and continue to be so.

3332 COMMISSIONER KATZ: But you are asking us at some threshold level, in your case 2,500 NAS, to maintain and to dictate a monopoly -- shall remain in those territories in perpetuity or until the next time we review this situation.

3333 MR. DOWNS: Well, again, I go back to the fact that we had identified that there would be a case-by-case approach to it which our reflection was that's what the Commission had indicated at a point in time that that was the approach that should be taken, on a case-by-case basis looking at each company.

3334 By doing that we have tried, with that in mind, to come up with three criteria that could be looked at that would determine should there be competition in that area or not. So we based it on that fact.

3335 We are not saying 2,500 no competition. We are saying, and what we were trying to do, is come forward with some criteria that would help in that determination.

3336 COMMISSIONER KATZ: But you do understand it is a balance because we are not giving the customer the opportunity should someone want to come into that market, to provide alternative services; different, better, as the case may be?

3337 MR. HOLMES: I think we have said in our evidence and in our submission today that, you know, customers have not suffered for being out in rural Ontario and being our customers, you know.

3338 Really, there is no digital divide when it comes to SILEC-operating territories between large, urban centres and what our member companies can do. We provide a pretty good list of services. That being said, you know, we are not opposed to local competition generally as a principle.

3339 What we need based on the size of our companies -- and I understand what you were saying about, you know, the flows of the market and the changes in the market based on market forces and consolidation and things like that.

3340 But you know we have got companies that are going concerns here that are providing very good levels of service, great levels of service when you compare perhaps what's going on outside their exchanges in their immediate operating territories in terms of availability of broadband.

3341 We think this is good. Why would you compromise it?

3342 We realize that the Commission wants to see local competition and is even under an imperative to make it happen wherever possible. But we say it's just not necessarily possible in absolutely every case. Where it is possible, you know, let's open those exchanges where the analysis demonstrates that it is possible and let's open those markets to local competition.

3343 COMMISSIONER KATZ: Thank you. Those are my questions.

3344 Just one more point. In that spreadsheet you are going to provide to us with those companies, those OTA member companies, that don't have LNP today, can you identify an estimated cost of the provision of that LNP as well? If I didn't say it before I want to just reiterate it.

3345 MR. HOLMES: Yeah, we can do that.

UNDERTAKING

3346 COMMISSIONER KATZ: Great, thank you. Those are my questions.

3347 THE CHAIRPERSON: Let me just ask one follow up before passing you on to one of my other colleagues.

3348 You are always making the point, and you made it just now, that you serve a small area that you need a monopoly protection so that you can serve the outlying areas too and if you let competition in they will only go into the core areas and leave you with the high-cost area.

3349 Has it actually ever happened that somebody has come into a SILEC, taken over the high-cost area and the SILEC goes out of business and the company refuses and there is nobody there to serve the outlying area?

3350 I mean this is the scenario you always paint, that the outlying areas will be without service. Has it actually ever happened?

3351 MR. HOLMES: I think it is the scenario we are worried about. You know local competition was just opened up in 2006. I don't think we saw any proposed implementation plans until 2008. So it is early days but we just sit back and take a look at what the possibilities are.

3352 You know we have got some operators on the panel here who know their business really well and --

3353 THE CHAIRPERSON: I just want to understand the business logic then. Let's assume this happens. We all want to avoid it. That's a given but it happens.

3354 Let's take Execulink. You go belly up. Presumably your assets in your operation will be sold in bankruptcy and all of those customers are there. They need services.

3355 I cannot imagine that Bell or one of your competitors wouldn't step in and buy it at bankruptcy prices. I mean, in effect there would be no service to those outlying areas. It seems to me it's a theoretical possibility but not a realistic one.

3356 If I'm wrong tell me why.

3357 MR. STEVENS: You probably are correct. I think there was one example happened many years ago in Ontario where in Muskoka-Parry Sound, a telephone company with financial trouble and at that time the Ontario government expropriated them and sold them for a very low price to Bell.

3358 So I mean I assume it would happen but with great disruption to the customers -- great disruption. You know the customers would be hurt significantly through that process.

3366 MR. HOLMES: One answer to that would be the SILEC framework has typically gone up for review, you know, every four or five years, that kind of time frame. So that is one possible suggestion.

3367 You could limit it for that period of time and then, pursuant to the review of the next framework, review the existing service providers in Category 1 to see whether it is still required. That is a possibility.

3368 CONSEILLÈRE LAMARRE : Merci. C'est tout.

3369 THE CHAIRPERSON: Then let me go back to something that caught my eye when you were doing initial -- is page 21, where you are talking about the interconnection with wireless carriers, and you are basically saying you get no money, it all goes through Bell.

3370 Can you explain that a bit more? I asked my staff, they knew nothing about the situation, so maybe you can elaborate what this is and how this benefits you.

3371 MR. STEVENS: Yes. I will try to do that.

3372 A bit of background. For SILECs, the Commission's ruling and determination for SILECs. The SILECs interconnect with ILECs on the LIR basis. I think the definition is devised by the Commission, local interconnection region, for SILECs to interconnect. Which means, and for us we have our LIR and a competitor, if a SILEC came to our territory they would connect with us and through a jointly agreed interconnection point.

3373 When you brought in the wireless number portability and it was recommended by -- and we were part of the panel -- that interconnection also be on a LIR basis, to mirror what was done for a SILEC, but the Commission decided to allow the wireless providers to interconnect on the LRA basis, local -- sorry, LCA basis, local calling area basis.

3374 And for us, and a good example for Execulink and our area, we are part of the London LCA, we have free calling to London, so we are considered part of that area. So a provider, Bell Mobility or Telus or Rogers, if they connected in London, by that order the Commission did, it says that they could then get access to number portability for our customers through that connection with Bell.

3375 Which means that they would connect with Bell, we would have to make arrangements with Bell to carry the traffic to our area, do the number portability, the number porting, carry it back to Bell. Bell gets the revenue from the carrier because they are the one they have interconnected with. We get no revenue and still have the cost.

3376 That is why we are saying we thought the decision at that time was wrong and causing us some problems.

3377 THE CHAIRPERSON: What do you want from us?

3378 MR. STEVENS: I guess we would like to have a review. We have been trying to work that out with the carriers. And it has come up now through this Part 7, actually the cable carriers have just brought forward interconnection with the SILECs. And I guess we would like at that time to review it and reconsider it so that we get compensation at the time.

3379 THE CHAIRPERSON: Yes, but you want compensation directly from the wireless carrier or from Bell? You want that Bell gives you part of the slice they get from the wireless?

3380 MR. STEVENS: No, we really liked it when they connect with us directly. That way it makes infinite sense compared to the regime as the SILECs. If we mirror that and they connect with us on the same basis, it would --

3381 THE CHAIRPERSON: And would you negotiate, one by one, or would you negotiate as a group?

3382 MR. STEVENS: Well, we would work with the carriers as a group. I mean, we would have to have individual arrangements for each company.

3383 THE CHAIRPERSON: But I mean, let's take with carrier Rogers, Rogers wouldn't work with OTA for all its members, it would have to meet with every one of their SILECs to make a deal?

3384 MR. STEVENS: Oh, they could meet with OTA to make a deal, absolutely, to do that. But the actual point of interconnection has to be where the carrier is.

3385 THE CHAIRPERSON: And this is before us right now or -- I mean, why are you raising it in this proceeding? That is what I am trying to figure out.

3386 MR. HOLMES: It is not before you right now. When we looked at your questions about wireless number portability in the notice of consultation we thought this was an opportunity to raise it up again.

3387 We took a look at the decision that came out a while ago and we didn't like it. We haven't filed a review and vary or anything like that on it yet, but it does keep rearing its ugly head in OTA internal discussions. So we thought we would raise it here just to highlight some problems.

3388 THE CHAIRPERSON: Now having raised it, what is the follow-up action that you expect from us? Assume that by in two years there is a suggestion, then what?

--- Pause

3389 MR. HOLMES: I don't think we can realistically expect anything from you in the absence of a review and vary application from us.

3390 THE CHAIRPERSON: Okay, thank you.

3391 Secondly, I will just make sure I didn't misunderstand you, TBayTel. If I understood your submission, essentially you have been made subject to the local competition rule and you face local competition in your territory. So therefore, you feel grossly simplified, essentially what was done to me should be done to the others as well. That is your submission, unless I misunderstood it?

3392 MR. OLENICK: That is correct.

3393 THE CHAIRPERSON: And the proposal that OTA put forward of two categories, 1 and 2, that anybody under 2,500 basically does not have to face this. Do you support that?

3394 MR. OLENICK: Yes, we do

3395 THE CHAIRPERSON: But the one over 2,500 basically should get the same treatment as TBayTel, that's what you are saying?

3396 MR. OLENICK: Basically, yes. You are still going to be working on a case by case basis.

3397 THE CHAIRPERSON: Okay, thank you very much. Those were all our questions.

3398 We will take a 10-minute break before we see the next one. Thank you.

3703 COMMISSIONER KATZ: Just one question. Thank you for coming here as well.

3704 Mr. Samson, what is the dynamics of residents joining Smart Papineau? What do they have to physically do? Are they just taxpayers who can join automatically? Do you have to sign up? Are there obligations to pay an annual fee? How does that work?

3705 MR. SAMSON: It is a one-year contract, renewable obviously, with a base connecting price of $200 and an annual fee.

3706 Now, there are levels of -- not of speed but of capacity and the base rate is $42.95 for residential and $69.95 for commercial.

3707 And after that, if you want to increase not your speed but your capacity -- we don't control speed, we give everything we have -- then it increases to $59.95 for the private, for the residential service and I think the super capacity is about $89.95 for residential.

3708 COMMISSIONER KATZ: And you are saying that the competitors are coming in and underpricing you?

3737 The Commission has decided to change the order of appearance for the rebuttal phase of the oral hearing to be held next week.

3738 We will, as stated in the Commission's organization and conduct letter of September 17, proceed in reverse order. However, the reverse order will start with the parties that appeared in Timmins, followed by the parties that appeared in Gatineau.

3739 A copy of the revised agenda will be posted on the Commission website shortly.

3740 And also, undertakings are to be filed and served by close of business Monday, November 1st, 2010.

3741 We will reconvene in Gatineau to continue this hearing on Monday, November 1st at 9:00 a.m.

3742 Thank you very much, everyone.

--- Whereupon the hearing adjourned at 1215, to resume on Monday, November 1, 2010 at 0900